The MacNeil/Lehrer Report; Charities

ROBERT MacNEIL: Good evening. If you`re planning to give money to some charity and deduct it from your 1977 income tax, tomorrow is the last day you can write the check. And with that in mind, it`s probable that fundraising groups have been slipping appeals like these into your mailbox. This pile was received in the past three days by four members of our staff. Last year Americans gave nearly $29 billion to charity; this year it`s estimated that contributions may reach $32 billion. But while they`re getting more generous, Americans are also demanding more information. Tonight, a few questions about charity: where does the money go? Should the donor have a right to know? Should the charity have an obligation to tell? Jim?

JIM LEHRER: Robin, philanthropy, the giving of money for charitable purposes, is the nation`s seventh largest industry. Two percent of our personal income goes to charity; or in specific terms, 200,000 different charities, large and small, national and local. Over forty-two percent of the money goes to religious groups, the rest to hospitals, educational organizations, social welfare groups, the arts and so on. It`s understandable, then, that charges of impropriety, mismanagement or whatever concerning any particular charity attract a lot of attention. In recent months the biggest headline makers have been the Pallottine Fathers of Baltimore, under investigation for allegedly spending only six percent of some $20 million collected on charitable purposes, the rest going for fund raising costs, investments, and loans to Maryland politicians; the United Kidney Foundation, accused of spending only five cents of a donated dollar for direct aid to kidney patients; and the fabled Father Flanagan Boys` Town in Nebraska, accused of spending less than a third of its income on services.

One of the organizations which monitor the operations of these and other charitable organizations nationwide is the Better Business Bureau. Helen O`Rourke is vice president of the Bureau`s national council and is in charge of its Philanthropic Advisory Service. She was a professional fund raiser herself before joining the bureau. Ms. O`Rourke, from your overview perspective, how bad is the situation, in terms of outright fraud, shady operations, poor management and so on in the charity business?

HELEN O`ROURKE: Well, I`d like to put it in four categories. We have the well-managed and the well-intentioned, we have the well-intentioned and the poorly managed, we have the ones with little charitable intent with poor management, and then outright fraud. The outright fraud is very, very low; and that is taken care of legally, usually by the postal authorities.

LEHRER: It`s not a major problem?

O`ROURKE: I don`t think that`s a major problem. The problem is the group that`s on the borderline, the little charitable intent and bad management, and those are the groups that usually end up on our "give, but give wisely" listing or they...

LEHRER: Little charitable intent. You mean, they just kind of want to be nice to people.

O`ROURKE: Well, they have the tax-exempt status for a program that they say they`re going to do, and we find that these groups will not give us financial information, sometimes they won`t even answer our mail; other times they have five percent program and ninety-five percent fund raising, they may have a conflict of interest, they may not give us any financial information at all, they don`t have an outside audit, they send unordered merchandise requesting payment, and many people don`t realize that they are not obligated to pay for anything that comes through the mail. And as much as we have talked about it for the last seven years -- at least, since I`ve been at the council -- I still get letters from all over the country saying, I feel badly because I can`t send money for this unordered item that I get in the mail.

LEHRER: Other than outright fraud, of course, which is in a category all itself, where do you find the major problems being? Is it getting the proper information from an organization, is it the problem of too much money being spent on administrative costs and not going to the stated intent of the charity, or what?

O`ROURKE: I think the biggest problem is financial. A lot of groups do not have an outside audit, and I had one group tell me that they couldn`t afford an outside audit and yet they were taking in four million dollars a year. They also feel that no one should be monitoring them, and they don`t realize that the public comes to us and wants to know, they ask these questions; and when they come to us of course we go to the organization.

LEHRER: And you feel that all charitable organizations that solicit money have an obligation to fully disclose where they get their money and how they spend it?

O`ROURKE: Certainly. It`s the stewardship of the money, and after all, it is a tax-exempt, charitable deduction, and it`s costing us all money for that; and I think any group that has this kind of a deduction and goes to the marketplace should be accountable for the money that they get from the public.

LEHRER: All right, thank you. Robin?

MacNEIL: Concern about how the American philanthropic community operates has led thirty states to enact regulations, most of them involving financial disclosure. Only religious charities are exempted. On the federal level the Post Office cracks down on crooked charities with its statutes against false representation and mail fraud, and charities keep their tax- exempt status by filing annual financial reports with the Internal Revenue Service. Now there`s a proposal for further federal oversight, a bill sponsored by Congressman Charles Wilson of California. It would require charities asking for money through the mail to disclose, among other things, the percentage of the previous year`s contribution that actually went to the charitable purpose. Such opposition arose to that bill from special interest groups in this last session that the bill was dropped in this session of Congress. Save the Children Federation has been a long-time advocate of disclosure by charities. Kenneth Phillips is Director of Development and Public Information for Save the Children. Mr. Phillips, how bad is the charity situation? Is it just a few bad apples in the barrel?

KENNETH PHILLIPS:I think it`s primarily a case of a few bad apples, but the problem is that the public hears more about those bad apples and has come to believe that more charities than the few are involved in abuse.

MacNEIL: Is the federal legislation needed? Why not just state bills? Thirty states have already enacted legislation; why a federal bill?

PHILLIPS: Save the Children has supported federal legislation, primarily because we are involved in a national fund raising program. It`s very difficult to have to deal with one state with one set of regulations and another state with another set. It`s a crazy quilt of regulations, so I think we do need a single law that everyone will adhere to.

MacNEIL: Does that -- all those different regulations and adhering to them -- actually cost an organization like yours money?

PHILLIPS: It does in the sense of having to fill out forms that can be very extensive for each state; and each state has a different set, so that it does cost probably a third or a half of a person`s time through the year.

MacNEIL: Does full disclosure drive donors away by revealing just how much of the dollar is often used for administrative costs and the fund raising act itself?

PHILLIPS: Save the Children thinks not. Two years ago we started including exactly those figures in our fund raising material, and this is fund raising material that went to new donors. We found that the results increased by more than double. Now, we made other changes in our materials, so that we can`t say that this disclosure was the cause; but what we can say is that it doesn`t hurt.

MacNEIL: Do you have a kind of rough percentage in mind of what proportion of administrative costs to what proportion of the money that actually goes to do the work intended is a good proportion in a well-run charity?

PHILLIPS: In a well-run charity that`s dealing with a standard program rather than a controversial one, I think something in the area of thirty percent would be adequate.

MacNEIL: In other words, the costs of paying the people like yourself and everything else and the fund raising and everything, thirty percent, and the rest should actually go to do the job you`re raising the money for.

PHILLIPS: Right. In our case it`s lower, but that`s exceptional.

MacNEIL: I see. You are a non-religious charity, or a secular charity; do you believe that religious charities should be exempt from disclosure?

PHILLIPS: Yes, we do, mainly because laws are universal, and all of the fund raising organizations in this country are going to the same people. There are 70 million households; these are the donors...

MacNEIL: I think I maybe misunderstand you. You believe they should be exempt, or ...

PHILLIPS: Should be included. Should be covered, should not be exempt, I`m sorry; because the laws should be universal. Leave it up to the consumers. Let the consumers or the donors decide, but for them to decide they need complete information, and that should be the same information for all organizations, regardless of their background or their objectives.

MacNEIL: Thank you. Jim?

LEHRER: As I said earlier, religious groups receive the largest hunk of the donated dollars, and most are opposed to being included in the charity disclosure provision of any bill. The Reverend Edwin Dill feels that way; he is the mission procurator, or fund raiser, for a charitable group known as the Mission Servants of the Most Holy Trinity. He`s also the immediate past president of the National Catholic Development Conference, an organization of Catholic fund raisers and development officers. Father, why do you feel religious organizations should be exempt from mandated disclosure provisions?

Rev. EDWIN DILL: Well, I don`t think they should be exempted from mandated disclosure provisions, but I do think they should be exempted from mandated disclosure provisions mandated by federal or state law. As you may be aware, the Catholic Church has recently...

LEHRER: In other words, you don`t want the...

DILL:I don`t want the government mandating it.

LEHRER: Who do you want to do it?

DILL: I want the Church authorities to mandate it.

LEHRER: But are they doing it?

DILL: Well, we have just passed a set of guidelines and principles for fund raising which does say that every fund raising organization should make known to its donors full disclosure of its costs and programs.

LEHRER: Why do you not want the government to do it?

DILL: Well, there is a traditional delicate balance between the government and the church in our history in our constitutional setup. We think that even the type of disclosure that the Wilson bill, or H.R. 41, demands, could lead, as the editorials in the Washington Post put it, to further regulatory incursion.

LEHRER: What about Ms. O`Rourke`s point, though, that you-all are already tied in irretrievably to the federal government because of your tax-exempt status? If an individual gives to one of your charitable groups, they can take a tax exemption on that. Aren`t you already there?

DILL: Oh, we`re tied in to the federal government, no doubt, and we`re tied in in many other ways. But I think that the government and laws have traditionally left religious fund raising out of these laws and I think they should continue, because there is a certain aspect about religious fund raising that I consider different from other fund raising.

LEHRER: What is that difference? Mr. Phillips` point is that you go to the same marketplace as everyone else.

DILL: Yes, I understand his point. We do go to the same marketplace; we`re in the same marketplace. Religious organizations are supposed to be in the marketplace. I do think that they should not be exempt if they in effect put off their religious purpose, if they go to people as simply secular organizations, if they go as completely social benefit organizations. But if they maintain their religious nature and it is truly religious fund raising, I think there is something special about this.

LEHRER: Well, whether it`s government mandated or not, do you feel that every individual who gives money to a religious organization has a right to know from that organization exactly how that money is being spent and the percentage, for instance, as Robin has just discussed with Mr. Phillips?

DILL: Yes, I do; definitely.

LEHRER: All right, now if it`s not mandated by the government or somebody else, how does a person get that information?

DILL: Well, I think the person should get that information directly from the charity. One of the difficulties in charities recently is that it has become impersonal; and to distribute this type of information to a third party I think adds to the impersonality. My feeling is that any donor should have the right to expect a full financial disclosure from any charity, religious charities included, to which they donate.

LEHRER: And if they can`t get it they shouldn`t give to that charity.

DILL: Exactly. It comes down to that; every donor makes the decision. This is not a tax-compelled type of giving.

LEHRER: All right, thank you, Father. Robin?

MacNEIL: Americans don`t just give money spontaneously, they usually have to be asked for it. The people who do the asking are often professional fund raisers. Henry Goldstein is President of the Oram Group, Incorporated, a fund raising firm based in New York and Washington. He`s been an officer of the National Society of Fund Raisers and the American Association of Fund Raising Council. Mr. Goldstein, how much does the public have a right to know?

HENRY GOLDSTEIN: I believe the public has a right to know, and I don`t believe that that right should be inhibited; and I think there are a number of methods for the public to find out. The best one, of course, is call Helen. A second one is to communicate with the charity directly and ask for information. A third one -- of course, this is a little more complicated, but every charity has to file a form every year with the federal government called the 990. That form is public information. Very few donors are going to go that far, but it is there.

MacNEIL: I see. What is your assessment of how bad the situation is? Are the few bad apples poisoning the well, to mix a metaphor?

GOLDSTEIN: I don`t know if it`s poisoning the well...

MacNEIL: Has it got you worried, as a professional fund raiser?

GOLDSTEIN: I do worry as a professional, because the headlines are copped by the Pallottine Fathers of Baltimore by the Gorman Brothers or by the infamous miscreants, whoever they are. To that extent I`m concerned and I worry. But I think I line up with Helen; I think that the fourth category of outright fraud is relatively infrequent, and I`ve seen more abuse among very small operations like firemen`s carnivals and things of that kind than I have with very major charitable organizations.

MacNEIL: Do you agree that federal regulation is needed?

GOLDSTEIN: Yes, but possibly not in the same sense as my colleagues. I am very disturbed about the multiplicity of law -- bad law -- being enacted in more than thirty -- it`s closer to thirty-eight or thirty nine, I believe now -- and the trend, of course, of the attorneys general is to enact more of it. I feel strongly that some kind of federal regulation is going to come, but one point I want to make -- and I think it`s the main reason I have trouble with H.R. 41 -- is that enforcement would be with the Post Office. And the first time I heard that I really thought it was a sick joke because they really cannot handle the problem of getting the mail delivered; they have no experience in evaluating charities, as IRS has; and though IRS may be unpopular with lots of your viewers, if we`re going to have federal regulation that`s where it ought to be regulated from, in my judgment.

MacNEIL: If the administrative costs of a charity greatly exceed the kinds of percentage Mr. Phillips was talking about, or say they`re more than fifty percent of the total amount donated, does that mean the fund is being ripped off or mismanaged?

GOLDSTEIN: I have problems with percentage limitations, and Mr. Phillips opened the bag up a little bit when he talked about a controversial versus a non-controversial organization. We happen, in our firm, to represent many social action organizations; sometimes they`re new -- organizations, let`s say, in the feminist movement. They`re just getting started, they don`t have reams of volunteers; their costs can be rather high in the process of acquiring new donors and making their cause visible. If a cause like Boy Scouts or Save the Children or a major hospital in a community, if they were running very high costs I would be concerned. So to some extent there`s an apples and oranges situation when we compare one charitable enterprise with another.

MacNEIL: I see. Just finally, in a word, do you agree that religious charities should be exempt or not exempt from disclosure?

GOLDSTEIN:I can`t take a yes-or-no position, because I think we have to understand that there are substantial First Amendment questions here. But what I would say is that in its sacerdotal function -- in other words, a congregation, a parish, a church directly -- I think they should be exempt, but when you`re operating a hospital, a social service agency, whatever, I don`t see any reason for such organizations to be exempt on that basis.

MacNEIL: Thank you. Jim?

LEHRER: Father Dill, would you agree with those particular lines that Mr. Goldstein just laid out?

DILL: Well, not exactly, because some of the works that he enumerated at the end of his statement there are what we would consider traditionally gospel work, and I think they are truly religious. I think one of the underlying...

LEHRER: You mean like running a hospital?

DILL: Oh, yes. Up until a hundred years ago -- I`m not sure of my exact dates, but -- many of the works that the government now does were solely the prerogative of religious organizations. I think one of the underlying problems in this whole conflict is that the religious charities and government endeavors are overlapping. And I don`t like to see the religious organizations retreat from what they would consider true gospel work.

LEHRER: Let me ask you, Mrs. O`Rourke, what do you think of Father Dill`s exempt religious groups argument?

O`ROURKE: Well, we don`t comment on the validity of a church, and we don`t report on the membership groups of a church, either educational or the hospital. But when they go to the marketplace and they`re on the radio, the TV, or they send letters out and go outside of their membership, then it comes under our reporting.

LEHRER: Do you think they should be exempt from federal reporting procedures and any other kind of ...

O`ROURKE: I would not like to see federal reporting in the first place. In the second place, I don`t think anyone should be exempt. As long as they are going to the public for funds, I think that everyone should be treated the same.

LEHRER: All right. You do not favor, then, the federal system that`s been proposed in the Wilson bill. How, then, would you get your information?

O`ROURKE: I feel that the information should come from the organizations, and no matter if you do have federal regulation, the people are going to want a third party. The states, I think, can be very strong, but I also would like to see them have the uniformity in what they`re doing. I think the states are closer to the organizations they`re working with. But I find that the public doesn`t go to the organization and ask for the information, even though it is there to be given to them, and even if that organization does give them the information, I have to monitor that information to be sure that it`s correct because we find some organizations that don`t put all the details on that.

LEHRER: Then what`s your solution?

O`ROURKE: My solution would be, of course, for the states to be strong and for the states to have uniformity so that it wouldn`t be a lot of cost for these organizations to fill out these forms; and monitoring organizations such as ours. Because the people are going to a third party. If they believed the organization, they wouldn`t come to us in the beginning.

LEHRER: They`re already suspicious, or they wouldn`t call.

O`ROURKE: Oh, they`re not suspicious; I think in the seven years I`ve been at the council I haven`t had twenty-five people who`ve said anything bad about the organizations, they`re just inquiring; they just want to know. And the fact is, they don`t even want to make the decision, they want me to make the decision. They want to know if they`re good or bad, should they give to them. And when you talk about sending all this information to them, they couldn`t read it; they couldn`t read the audits, and half the information they wouldn`t understand anyway.

LEHRER: Mr. Phillips, let me ask you: how do you respond to Father Dill`s argument for continuing to exempt religious organizations?

PHILLIPS: I guess if I heard that coming from representatives of all the different religious organizations, my confidence would be higher. But I don`t see how one person is representing all of the many, many religious groups in this country. And I think that`s why it does have to be a national federal law that would in fact get everybody covered.

LEHRER: Well, Ms. O`Rourke says it can be done just with good state laws also. You don`t agree with that?

PHILLIPS: If the states got together -- and I think there is a movement in that direction with the states of New York, Connecticut, New Jersey and one other, Massachusetts, I think, where they are talking about adopting a common form -- that would move in the right direction, yes. But that`s only five states out of all of them.

LEHRER: All right. Robin?

MacNEIL: Finally, in case there`s anybody who has any money left from Christmas and really is thinking of making a donation before the new year, Ms. O`Rourke, what advice do you have for people giving to charities? Are there specific practices that they should be wary of and are a kind of signal of something a bit dodgy in a charity?

O`ROURKE:I think my pet peeve is when I hear of people giving cash. Always write a check, never give cash to any organization.

MacNEIL: Why is that?

O`ROURKE: Well, because there`s no accountability for that money, and I don`t care how well-run an organization is, there are people that are working there, and cash coming in in envelopes can`t be accounted for; and the same thing goes for canisters. I think the canister days are going out for the same reasons. I know when I was working in fund raising we`d put out canisters and go back, and they`d be broken into. I think that people should ask questions. I think one of the biggest problems with all of us is that we are afraid to ask questions about a charitable organization; and when someone comes to your door, ask them questions. And just because it`s a child coming to your door, don`t assume that they are legitimate, either, because -- of course, the Boy Scouts and the Girl Scouts, so many of them are accompanied by parents nowadays -- but we`ve had cases where we had the Candy Caper Kids, as we called them, and other groups who come to your door; and of course it`s only a dollar here and a dollar there, but that could be going to a very worthwhile charity.

Unordered merchandise is one of our pet peeves, because this causes high fund raising costs. I think a lot of organizations are getting out of this; some of them are still staying in it now. But I think the main thing is, ask questions and go to your consumer area, to your Better Business Bureau or to anyone, or go back to the organization itself and call them, because once you start asking questions they`ll back off if they`re not legitimate.

MacNEIL: Let me ask these gentlemen, do you have any particular advice for people who are thinking of giving?

PHILLIPS: Yes. At Save the Children there are three basic issues we think that people should ask, and they relate to the agency`s effectiveness in delivering services; what is it really accomplishing? And then the second one has to do with administrative integrity; how well is the charity run? And the third one is simply an index of fund raising efficiency; how much return does that organization get in contributions on the dollars it spends in fund raising?

MacNEIL: What`s your advice?

GOLDSTEIN: I would agree with Ken; I would add one other thing: particularly with an organization within the community, take a look at who the leadership, the volunteer leadership, is; the board of directors, who`s on it, whose names do you recognize; and don`t be afraid to ask questions.

MacNEIL: Father Dill, do you have some advice?

DILL: Well, I think I would concur with much of the advice given. I think people have not been accustomed to ask information from charities directly. I think that they will learn to do this, and I think they`re entitled to any information they do ask for and that they should ask freely, even religious charities. I think many people were a little bit loath to ask religious charities because they considered it maybe a breach of faith or a lack of confidence in the religious aspect itself. But it isn`t, and it shouldn`t be considered such.

MacNEIL: They felt a kind of moral compulsion there.

DILL: Yes; yes, very much.

MacNEIL: All right. Well, thank you all very much in Washington, and thank you gentlemen. If you would like further guidance about giving, you can write to the Philanthropic Advisory Service Division, Department CT, Council of Better Bureaus, Inc., 1150 Seventeenth Street NW, Washington, D.C. 20036. Or, National Information Bureau, Inc., 419 Park Avenue South, New York, New York, 10016.

That`s all for tonight. Jim Lehrer and I will be back on Monday night. I`m Robert MacNeil. Good night -- Happy New Year.